Unemployment Surprises Higher

• Employment rose 39.5k in August (consensus +20k), following a 15.9k decline in July, but unemployment surprised higher at 4.6% (consensus 4.5%). This suggests the labour market continues to gradually loosen, something the RBA has been watching for, although changes to survey methodology mean the result should be read with some caution.
• NAB business confidence improved a little from Q2, but deteriorating margins and more challenging trading conditions suggest Australia shares many of the renewed cost pressures facing other countries. Markets still price over a 90% chance of an RBA hike next week, which remains widely expected.
• US Treasury yields jumped again overnight, with the 10yr up 10bps to 5.21% and the 2yr up 4bps to 4.93%, amid ongoing oil market volatility following Houthi attacks on Saudi oil infrastructure. Australian government bond yields followed, with the 10yr up 4bps to 5.42% as long-term borrowing costs continue to rise globally.
• President Xi’s Washington visit got underway with discussions focused on security, technology and AI, ahead of a dinner with AI leaders Altman, Cook and Huang. Separately, the US-China trade truce was extended until January 2027.